Declaration of interim dividend in private ltd.
This query is : Resolved
18 October 2013
Dear Sir,
What is the procedure for declaring Interim
Dividend in the case of Private Ltd Company.
Kindly give me the full details about these?
Dear Sir,
What is the procedure for declaring Interim
Dividend in the case of Private Ltd Company.
Kindly give me the full details about these?
18 October 2013
Hi
Interim dividend:
Dividend includes any interim dividend. Before declaration of interim dividend, it is legal obligation on the Board of directors of the company to satisfy that the financial position of the company is sound enough for declaration of dividend out of net profit of the company available for distribution after providing for depreciation and making the mandatory transfer of profits to reserves.
The Articles must provide power to pay Interim dividend:
The Articles of the company must authorise the Board to declare interim dividend. Regulation 86 of Table 'A' provides that the Board may from time to time pay to the members such Interim dividend as appear it to be justified by the profit of the company.
Where there is no power in the articles authorising the Board to pay interim dividend, the only way open to the company is to pay dividend after the same is declared at the annual general meeting. Even in respect of the latter the Articles must contain the provision therefor.
Interim dividend should be declared by the Board at the meeting:
A Board meeting should be called and rate at which dividend payable must be specifically stated in the resolution passed for declaration of interim dividend.
Declaration of interim dividend by directors does not create a debt; but declaration of dividend at a general meeting of company does.
Dividend to be rounded off to nearest rupee:
The payment of interim dividend to the shareholders involving fraction of 50 paise and above be rounded off to the rupee and the fraction of less than 50 paise may be ignored.
Declaration of Interim dividend should be unconditional:
The Board should obtain prior approval from the financial institutions/banks wherever required before declaration of interim dividends and it should be unconditional.
Interim dividend:
Dividend includes any interim dividend. Before declaration of interim dividend, it is legal obligation on the Board of directors of the company to satisfy that the financial position of the company is sound enough for declaration of dividend out of net profit of the company available for distribution after providing for depreciation and making the mandatory transfer of profits to reserves.
The Articles must provide power to pay Interim dividend:
The Articles of the company must authorise the Board to declare interim dividend. Regulation 86 of Table 'A' provides that the Board may from time to time pay to the members such Interim dividend as appear it to be justified by the profit of the company.
Where there is no power in the articles authorising the Board to pay interim dividend, the only way open to the company is to pay dividend after the same is declared at the annual general meeting. Even in respect of the latter the Articles must contain the provision therefor.
Interim dividend should be declared by the Board at the meeting:
A Board meeting should be called and rate at which dividend payable must be specifically stated in the resolution passed for declaration of interim dividend.
Declaration of interim dividend by directors does not create a debt; but declaration of dividend at a general meeting of company does.
Dividend to be rounded off to nearest rupee:
The payment of interim dividend to the shareholders involving fraction of 50 paise and above be rounded off to the rupee and the fraction of less than 50 paise may be ignored.
Declaration of Interim dividend should be unconditional:
The Board should obtain prior approval from the financial institutions/banks wherever required before declaration of interim dividends and it should be unconditional.
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18 October 2013
Amount of Interim dividend must be transferred to a separate bank account and payment must be paid within 5 days:
Interim dividend declared by the Board of directors of the company shall be transferred to the separate bank account within 5 days of such declaration and the amount so transferred shall not be utilised for any other purpose. The Interim dividend shall also be paid within thirty days from the date of its declaration by the Board.
Mode of payment of Interim dividend
Interim dividend shall be payable in cash and may be paid by cheque or warrant sent through the post direct to the registered address of the shareholder entitled to the payment of Interim dividend, or in the case of joint shareholders, to the registered address of that one of the joint shareholders who is first named on the register of members, or to such person and to such address as the shareholders or the joint shareholders may in writing direct.
Opening of unpaid Interim dividend account
Where an Interim dividend is declared by the Board of directors, which had not been paid or claimed within 30 days from the date of the declaration, the company shall transfer the unpaid or unclaimed Interim dividend to special account opened called "Unpaid Interim Dividend Account of XYZ Limited within seven days from the date of expiry of the said 30 days.
Transfer of unpaid/unclaimed Interim dividend to the Investor Education and Protection Fund
The provisions of sections 205A and 205C shall also apply to the Interim dividend which provides that any amount of unpaid or unclaimed dividend shall be transferred after 7 years to the Investor Education and Protection Fund established by the Central Government as dividend includes Interim dividend, the company will have to comply with the provision of said sections in respect of Interim dividend.
Interim dividend declared by the Board of directors of the company shall be transferred to the separate bank account within 5 days of such declaration and the amount so transferred shall not be utilised for any other purpose. The Interim dividend shall also be paid within thirty days from the date of its declaration by the Board.
Mode of payment of Interim dividend
Interim dividend shall be payable in cash and may be paid by cheque or warrant sent through the post direct to the registered address of the shareholder entitled to the payment of Interim dividend, or in the case of joint shareholders, to the registered address of that one of the joint shareholders who is first named on the register of members, or to such person and to such address as the shareholders or the joint shareholders may in writing direct.
Opening of unpaid Interim dividend account
Where an Interim dividend is declared by the Board of directors, which had not been paid or claimed within 30 days from the date of the declaration, the company shall transfer the unpaid or unclaimed Interim dividend to special account opened called "Unpaid Interim Dividend Account of XYZ Limited within seven days from the date of expiry of the said 30 days.
Transfer of unpaid/unclaimed Interim dividend to the Investor Education and Protection Fund
The provisions of sections 205A and 205C shall also apply to the Interim dividend which provides that any amount of unpaid or unclaimed dividend shall be transferred after 7 years to the Investor Education and Protection Fund established by the Central Government as dividend includes Interim dividend, the company will have to comply with the provision of said sections in respect of Interim dividend.
18 October 2013
Revocation of Interim dividend cannot be made
Section 2(14A) provides that the dividend includes interim dividend, therefore, once it has been declared and communicated, it shall become a debt for a company and cannot be revoked by the Board of directors after its declaration.
Procedure for payment of Interim dividend to non-residents
The company should approach authorised dealer (A.D.) by letter enclosing Form RCD 2, Form A2 and certified copy of resolutions of the Board (all in duplicate). The A.D. will after verification remit the dividend to non-residents and send the duplicate copy of forms to the RBI regional office.
Approval of members at the general meeting for Interim dividend
If the Interim dividend is approved by the Board of directors, the amount of Interim dividend shall be included in the profit and loss account for the year and also in the directors' report alongwith the final dividend, if any, proposed for the approval of the members at the forthcoming annual general meeting. When the audited accounts and directors' report are placed at the annual general meeting and adopted by the members, the interim dividend is deemed to have been approved by the company in general meeting.
Approval of dividend is the privilege of the general meeting and the Board can pay interim dividend if so authorised by the Articles of Association subject to the regularisation of the interim dividend by the company in general meeting. The general meeting for this purpose shall be an annual general meeting only, for the profit for the financial year would not otherwise be known. [Letter No. 8/13/(205)/79-CL-V, dated 18-7-1981].
Revocation of Interim dividend cannot be made
Section 2(14A) provides that the dividend includes interim dividend, therefore, once it has been declared and communicated, it shall become a debt for a company and cannot be revoked by the Board of directors after its declaration.
Procedure for payment of Interim dividend to non-residents
The company should approach authorised dealer (A.D.) by letter enclosing Form RCD 2, Form A2 and certified copy of resolutions of the Board (all in duplicate). The A.D. will after verification remit the dividend to non-residents and send the duplicate copy of forms to the RBI regional office.
Approval of members at the general meeting for Interim dividend
If the Interim dividend is approved by the Board of directors, the amount of Interim dividend shall be included in the profit and loss account for the year and also in the directors' report alongwith the final dividend, if any, proposed for the approval of the members at the forthcoming annual general meeting. When the audited accounts and directors' report are placed at the annual general meeting and adopted by the members, the interim dividend is deemed to have been approved by the company in general meeting.
Approval of dividend is the privilege of the general meeting and the Board can pay interim dividend if so authorised by the Articles of Association subject to the regularisation of the interim dividend by the company in general meeting. The general meeting for this purpose shall be an annual general meeting only, for the profit for the financial year would not otherwise be known. [Letter No. 8/13/(205)/79-CL-V, dated 18-7-1981].
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18 October 2013
Declaration of Record date for payment of interim dividend
A company shall declare record date for the purpose of ascertaining who are eligible to receive the interim dividend on the date of declaration of dividend to pay the interim dividend to the persons who are members as on the record date will be eligible to receive the dividend as the dividend is approved by the Board of directors of the company.
Listed companies are required to inform the NSDL/CDSL and Stock Exchange 21 days in advance of record date for payment of dividend declared by the Board for determining the names of shareholders and/or beneficiary owners entitled to interim dividend.
Publication of notice of record date
The company is required to publish notice in newspaper at least 7 days in advance once in English and other local language newspaper as required under section 154 of the companies Act, 1956.
A company shall declare record date for the purpose of ascertaining who are eligible to receive the interim dividend on the date of declaration of dividend to pay the interim dividend to the persons who are members as on the record date will be eligible to receive the dividend as the dividend is approved by the Board of directors of the company.
Listed companies are required to inform the NSDL/CDSL and Stock Exchange 21 days in advance of record date for payment of dividend declared by the Board for determining the names of shareholders and/or beneficiary owners entitled to interim dividend.
Publication of notice of record date
The company is required to publish notice in newspaper at least 7 days in advance once in English and other local language newspaper as required under section 154 of the companies Act, 1956.
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18 October 2013
Board meeting resolution for payment of interim dividend:
RESOLVED THAT an interim dividend of 20% (Rs 2.00 per share) amounting to Rs 30,00,000 be paid out of the profits of the Company for the year 2005-06 on the equity shares to those share holders whose names appear in the Register of Members of the Company on 20th June, 2006.
RESOLVED FURTHER THAT the Board of directors of the Company be and hereby declare the Record date as 20th Jan., 2006 to ascertain the eligibility of members to receive the interim dividend and that a notice in newspaper be published as required u/s 154 of the Companies Act, 1956.
RESOLVED FURTHER THAT a Bank Account Styled FL LIMITED (INTERIM DIVIDEND) ACCOUNT 2005-06 be opened with State Bank of Indore and a sum of Rs.30,00,000 being the entire amount of interim dividend, be transferred to the aforesaid account on or before fifth day of the approval by the Board for payment of interim dividend.
RESOLVED FURTHER THAT the dividend warrants be printed with the facsimile signature of Shri Ashok Jain, Managing Director and that the Bank be and is hereby instructed to honour all dividend warrants presented for payment, containing the facsimile signature.
RESOLVED FURTHER THAT dividend warrants be posted to the eligible shareholders within 30 days hereof.
RESOLVED FURTHER THAT the amounts remaining unpaid on the dividend account be transferred to UNPAID INTERIM DIVIDEND ACCOUNT 2005-06 on the expiry of 37 days from the date of declaration by the Board.
RESOLVED FURTHER THAT Ms. Abha Jaiswal, Company Secretary be and is hereby instructed to comply with all other formalities in this regard.
Board meeting resolution for payment of interim dividend:
RESOLVED THAT an interim dividend of 20% (Rs 2.00 per share) amounting to Rs 30,00,000 be paid out of the profits of the Company for the year 2005-06 on the equity shares to those share holders whose names appear in the Register of Members of the Company on 20th June, 2006.
RESOLVED FURTHER THAT the Board of directors of the Company be and hereby declare the Record date as 20th Jan., 2006 to ascertain the eligibility of members to receive the interim dividend and that a notice in newspaper be published as required u/s 154 of the Companies Act, 1956.
RESOLVED FURTHER THAT a Bank Account Styled FL LIMITED (INTERIM DIVIDEND) ACCOUNT 2005-06 be opened with State Bank of Indore and a sum of Rs.30,00,000 being the entire amount of interim dividend, be transferred to the aforesaid account on or before fifth day of the approval by the Board for payment of interim dividend.
RESOLVED FURTHER THAT the dividend warrants be printed with the facsimile signature of Shri Ashok Jain, Managing Director and that the Bank be and is hereby instructed to honour all dividend warrants presented for payment, containing the facsimile signature.
RESOLVED FURTHER THAT dividend warrants be posted to the eligible shareholders within 30 days hereof.
RESOLVED FURTHER THAT the amounts remaining unpaid on the dividend account be transferred to UNPAID INTERIM DIVIDEND ACCOUNT 2005-06 on the expiry of 37 days from the date of declaration by the Board.
RESOLVED FURTHER THAT Ms. Abha Jaiswal, Company Secretary be and is hereby instructed to comply with all other formalities in this regard.
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18 October 2013
General meeting resolution for approval of dividend:
The Chairman appraised that the Company has made payment of interim divided @ 20% to the Equity Shareholders of the Company during the year 2005-06. The Board has recommended to the members that looking into the profitability and future business prospects, the members of the Company should consider the interim dividend as the total final dividend @ 20% for the year 2005-06. A member moved the following motion for approval as an Ordinary Resolution:
RESOLVED THAT the dividend @ 20% (including the Interim Dividend) per Equity Share as recommended by the Board of directors for the year ended on 31st March, 2006 be and is hereby approved and confirmed the interim dividend declared and paid by the Company to its members.
General meeting resolution for approval of dividend:
The Chairman appraised that the Company has made payment of interim divided @ 20% to the Equity Shareholders of the Company during the year 2005-06. The Board has recommended to the members that looking into the profitability and future business prospects, the members of the Company should consider the interim dividend as the total final dividend @ 20% for the year 2005-06. A member moved the following motion for approval as an Ordinary Resolution:
RESOLVED THAT the dividend @ 20% (including the Interim Dividend) per Equity Share as recommended by the Board of directors for the year ended on 31st March, 2006 be and is hereby approved and confirmed the interim dividend declared and paid by the Company to its members.
18 October 2013
Specimen of notice of interim dividend to be published in newspaper
Notice pursuant to the provisions of section 154 of the Companies Act, 1956 is hereby given that at a meeting of Board of directors held on 3rd June, 2006, the directors have approved for payment of an Interim Dividend on equity shares @ 20% i.e. Rs. 2 per share for the year 2005-06. The dividend will be paid to those shareholders whose name appear on the Register of members as on 20th January, 2006 on the Record date decided by the Board of directors of the Company.
Alternate Specimen of Notice
NOTICE is hereby given that a meeting of the Board of Directors held on …………., the Directors have announced an Interim Dividend on equity shares @ …% i.e. Rs. …per share in view of the working results for the half year ended ……….. The dividend will be paid by …… to those shareholders whose name appear on the Register of members as on ………….. or their mandatees.
Notice is also given that the Register of Members and share transfer books of the Company will be closed from …….. to …….. both day inclusive.
For ABC Co. Ltd.
By Order of the Board,
Company Secretary
Dated ......... 20....
Specimen of notice of interim dividend to be published in newspaper
Notice pursuant to the provisions of section 154 of the Companies Act, 1956 is hereby given that at a meeting of Board of directors held on 3rd June, 2006, the directors have approved for payment of an Interim Dividend on equity shares @ 20% i.e. Rs. 2 per share for the year 2005-06. The dividend will be paid to those shareholders whose name appear on the Register of members as on 20th January, 2006 on the Record date decided by the Board of directors of the Company.
Alternate Specimen of Notice
NOTICE is hereby given that a meeting of the Board of Directors held on …………., the Directors have announced an Interim Dividend on equity shares @ …% i.e. Rs. …per share in view of the working results for the half year ended ……….. The dividend will be paid by …… to those shareholders whose name appear on the Register of members as on ………….. or their mandatees.
Notice is also given that the Register of Members and share transfer books of the Company will be closed from …….. to …….. both day inclusive.
For ABC Co. Ltd.
By Order of the Board,
Company Secretary
Dated ......... 20....
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18 October 2013
Thanks for the detailed reply.
Kindly Clarify the following points:
1. Whether a separate bank account to be opened in case of PRIVATE LIMITED COMPANY also, where all the shareholders are family members?
2. Advertisement in the Newspaper U/s 154 of the companies Act is applicable in case of PRIVATE LIMITED also?
3. Can a PRIVATE LIMITED company declare 200% INTERIM DIVIDEND as the company has earned good amount of Profit till now?
4. In case, 200% interim dividend is declare by the Private Limited Co., Is it necessary for the company to declare the same amount of dividend as final dividend in the AGM also?
5. What is the Tax Implication in INTERIM and FINAL DIVIDEND?
6. If articles are silent on interim dividend, then what is the option available?
Kindly throw some light on the above points also?
Kindly Clarify the following points:
1. Whether a separate bank account to be opened in case of PRIVATE LIMITED COMPANY also, where all the shareholders are family members?
2. Advertisement in the Newspaper U/s 154 of the companies Act is applicable in case of PRIVATE LIMITED also?
3. Can a PRIVATE LIMITED company declare 200% INTERIM DIVIDEND as the company has earned good amount of Profit till now?
4. In case, 200% interim dividend is declare by the Private Limited Co., Is it necessary for the company to declare the same amount of dividend as final dividend in the AGM also?
5. What is the Tax Implication in INTERIM and FINAL DIVIDEND?
6. If articles are silent on interim dividend, then what is the option available?
Kindly throw some light on the above points also?
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